Update: This post was written with “analysts’ live media appearances” in mind. Yet, the print media and blog sites should also be leery of insider tips provided by Street sources. Journalists and bloggers are often eager to share breaking news and scoops. Yet many Street traders would like nothing more than to plant a story with a friendly journalist who, through their authorship, may unknowingly (I’ll give most the benefit of the doubt) drive a stock for quick trade by the prime “source” of the news. Is this illegal? Yes it is. Does it happen? Far too often!
As we get ready for the probable summer launch of iPhone 2.0, brace yourself for a new round of media interviews featuring pundits, consultants and analysts, all eager to share their insights. Some will laud the new model and others will find glaring OMG faults. There will be few in the undecided camp. It’s either love it or hate it. I appreciate those with strong opinions but not if they are bought and paid for.
What troubles me the most are those media appearances by analysts who make their living by selling services (e.g. consulting services, reports, custom research projects, etc.) to the industry they critique and commentate on. Analysts associated with broker-dealers and RIAs are obligated to disclose any positions they hold in public companies they commentate on. Yet it seems there is no disclosure requirement for consulting firms outside of the securities industry. In addition to positions disclosures, it is important to know how an analyst gets paid. In my view, before uttering a word, the public has a right to know whether the “industry expert” they’re listening to receives any (even one dime) money from a company they mention during their public appearance. One could conclude that bias might creep into commentary if for example Godzilla-Telecom (not a real company) buys every product on the analyst’s menu at full retail and sponsors the analyst’s speaking engagements …ultimately accounting for 60% of the analyst’s gross income for the last five years. I am not begrudging analysts/consultants’ right to making a living from the industry they cover … just be up front about it. In my opinion full disclosure adds to credibility.
By the way … as Editor of iPhonAsia, let me state my rather obvious bias up front. I love Apple products and I am an Apple (AAPL) shareholder. Biased? … yes I am! Do I always report the good news only. No. I recently posted a story re an apparent “Great China Firewall” partial domain blockage of dot.Mac in China. It is my hope that this issue will be resolved and that China will tell their 30,000+ censors who monitor the Internet to ease up a bit. (whoops there goes my connectivity in China)